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Understanding Ecommerce Platforms Through Housing: Do You Rent, Own, or Get That Vacation Home in the Hamptons?

 

Have you seen the movie The Moneypit?

It’s such a great movie. I love the scene where the bathtub falls through the floor, and Tom Hanks, in a moment of catharsis, just starts hysterically laughing.

That movie was perhaps too influential in my early home ownership decisions along with my general inability to be “handy” around the house. Hoping to avoid a Moneypit-level disaster, I opted for low maintenance. Now, why am I talking about home buying? There are some handy analogies to be found in home ownership that we can use when trying to understand the different models for ecommerce platforms.

Recently, I was asked to give a talk on the various ecommerce platform approaches—

specifically highlighting some of the newest buzzwords around headless and microservices. The goal was to help folks understand what these newer approaches to ecommerce are and if they are the right fit.

In this deep dive, we’ll compare all the major approaches to ecommerce platforms— from custom software through headless and microservices—to different housing options. We’ll see how far we can take this analogy to expose the pros and cons of each.

A Custom Home Is Custom Software

ecommerce-and-housing

I own a beautiful old home in East Austin that was built in 1907. We stay in it about half the time and rent it out the other half. It’s an amazing house, but since it was built over 100 years ago, there are many “features” of the house that are very custom. Sometimes antique and custom finishes can be a work of art…but when it comes to electrical wiring, they can be terrifying.

When we need to replace something, like a door, we can’t just go to Home Depot and buy one. We literally have to get a custom door built to fit the house. That’s true of almost everything we’ve had to repair in the home. It costs more. We can’t do it ourselves. And it takes longer to find someone with the expertise to do the job right. On the plus side, we now know a bunch of talented craftsman across a variety of home improvement disciplines.

Many people like bespoke things. There is some charm and appeal to the “one-of-a-kind.” When things are custom-made, they come at a premium cost because more care and artistry was taken in the design or development. The challenge is the upkeep. When things are “custom” they are more difficult to maintain and even more difficult to repair when things break.

This is why custom software has the highest total cost of ownership and the greatest complexity over time.

Every time I speak to someone who has a custom ecommerce platform, they have the same pains around technical debt, cost of ownership, challenges with maintenance and instability. They also suffer from the inability to move quickly or make changes to their site without involving expensive development resources. They almost always use the words “trapped” or “stuck” and are burdened by long development roadmaps as they furiously try to keep up with the innovation in rapidly evolving industries.

Pros:

  • You can get exactly what you want and are limited only by how much you are willing to spend and the expertise you can enlist to build it

  • If you have extremely unique requirements, this could be your only option

Cons:

  • Very expensive

  • You’ll need expertise to handle maintenance and will have a limited number of specialists from which to choose

  • Change will be hard and slow

  • Over time, you’ll get deeper and deeper into technical debt

  • Custom software, like custom home ownership, is a big commitment of time and resources which makes moving more challenging and less frequent

The Suburbs Is Traditional Software

ecommerce-is-like-buying-a-house

In order to make houses more affordable for the masses, builders developed floor plans that could be purchased by many homeowners. They feature a variety of choices for personalization (i.e. flooring and light fixtures), but fundamentally utilize industry standard components throughout. All of the floor plans have the most common desirable features included, and then individual homeowners can purchase upgrades and add on custom features to suit their particular tastes and needs. The standardization reduces the cost to build the home, increases the number of professionals that will know how to work on the home and make improvements or repairs, and even opens up the possibility of DIY maintenance for those with the right skills.

Similarly, ecommerce software packages such as ATG, Websphere, Hybris, and Magento “standardized” the floor plans (versions) for ecommerce sites, reduced the time and cost associated with building a new site, and created an industry of experts who know how to work on those platforms. Just like a suburban home, you have many options out-of-the-box as well as the ability to customize, but the base floor plan will have most of the desirable features needed to run an ecommerce site. In addition, software ecosystems and houses have a large selection of available “add-ons” that integrate to solve specific needs and extend the capabilities of the platform (ex. personalization tools).

Home ownership and software licensing has another similar feature in that you “own” it once it’s built, meaning all of the responsibility for securing, maintaining, and repairing your new possession is entirely on you as the owner.

The total cost of ownership for traditional ecommerce software will be less than custom software, but constant maintenance is still a major consideration that includes updates, security, hosting, and more.

Buying or building a house is a big investment, and there are a lot of sunk costs associated with the purchase and move (realtor fees, agency fees, migration/moving costs). The cost of switching, the time and energy required to move all your stuff, and the investments made in extending your current platform or home, make a move a big and daunting decision to consider. This is why the average homeowner stays for 13 years and the average enterprise ecommerce software platform sticks around for at least 7 years. Custom sites often keep merchants “trapped” for even longer.

Pros:

  • Lower cost and less time to build initially than custom software

  • Larger available network of professionals who can work on the platform

  • Ownership means you have choices in how you configure or customize the platform

  • Standardization means upgrades and add-ons are more readily available

Cons:

  • Still expensive to build and maintain

  • Requires expertise to build, operate and repair

  • Significant ongoing costs (maintenance, upgrades, security, etc)

  • Traditional software like suburban homeownership is a big commitment of time and expense which makes moving more challenging and less frequent

Apartment Life Is Early SaaS

ecommerce-and-home-ownership

Apartments are great, especially if you are optimizing for shorter term or lower cost accommodations. I remember my first apartment in Waco, Texas was this horrible little one-bedroom, fully furnished with dirty brown shag carpeting, wood-paneled walls, and two different layers of floral-print wallpaper. I loved it. It was also only $300 per month.

As a young person, I had crappy apartments, but later my friends and I upgraded to newer ones that were much nicer. Because they are multi-tenant, with apartments you get all of these extra amenities like a gym, pool, security, and more, depending on the apartment. The cost of maintenance is WAY less than owning a house because you really just pay for the utilities you consume. Insurance is cheaper. You generally don’t have to commit for more than 6 to 12 months. If something breaks, call the front desk and ask them to send over a repair person.

Another big benefit is that apartment complexes are motivated to keep up with the latest trends to stay competitive, so the tenants are consistently getting the benefit of upgrades and improvements.

This is early SaaS in a nutshell. You can enjoy the benefits of security, hosting, and automatic updates in exchange for your monthly “rent.”

Pros:

  • Very affordable with little to no up-front expense

  • Lots of competition keeps the prices down

  • Most of the maintenance is taken care of in the price of rent/licensing

  • All of the infrastructure is handled

  • Very little expertise required to operate/maintain

  • Low commitment with short-term contracts

  • Designed to be easy to move in and move out

  • Options for standard templates can get you to market faster

  • Extra amenities/features included

Cons:

  • Reduced flexibility and customizability (Maybe you can paint a wall? Hang some pictures?)

  • Your neighbors are super close and their ecommerce sites may look very similar to yours.

A Modern Condo is Open SaaS

open-saas-is-like-a-condo

About seven years ago, I got divorced and moved out of my house in the suburbs. When I evaluated what I wanted, I decided that a condo or townhome would be perfect. After all, I don’t like maintenance. As previously mentioned, I’m not handy and don’t enjoy home improvement projects. But, I also have two kids (13-year-old twins) and wanted them to have space they could call their own and personalize to their heart’s content.

I also didn’t want to pay for a bunch of extra room that I didn’t need.

So, I bought a townhome that has a nice little backyard for our dog, three bedrooms (one for each of us), two and a half baths, and just enough space for everything we needed. Since buying it, we’ve changed flooring, updated cabinets in the kitchen, painted everything (including some really amazing wall murals that they’ve since outgrown), tiled backsplash in the kitchen and more. Because we owned it, we could actually customize the inside of the place as much as we wanted, including tearing down walls or finishing out the garage.

But the HOA handles the maintenance of the exterior, including fencing, painting, roofing, and even insurance for the structure. I pay an HOA fee, but the overall cost of ownership is significantly less than a similarly-sized house in the same area of town. Plus, we have a really nice pool, decent little gym, security cameras, entrance gates with keypad entry, and more. The little gated community is super safe and we have incredibly sweet neighbors. It’s perfect for us.

It’s like the best of both worlds: the flexibility of home ownership to customize the living spaces, with the benefits of a multi-tenant community, all for a lower total cost of traditional home ownership.

The hybrid model has a ton of advantages for someone like me, looking for minimal maintenance and maximum comfort and convenience.

Here at BigCommerce, we call ourselves “Open SaaS” because we have taken the benefits of the multi-tenant SaaS model (lower costs, increased performance and security, faster time to market etc) and married them to the flexibility of traditional software by opening up APIs to allow merchants and partners to extend the platform to meet their unique requirements.

In addition, our clients get the benefit of a strong ecosystem of technology partners that have pre-built integrations to extend the platform for our 70,000 merchants. That’s the benefit of being able to afford best-in-class tools to add to your platform, like picking your favorite neighborhood to gain access to the best restaurants and parks.

Pros:

  • Much lower total cost of ownership than traditional software

  • Flexible and extensible in the areas you want, with infrastructure, security and much more (fully hosted on scalable Google Cloud, Akamai CDN, DDoS protection, PCI compliance)

  • Lower commitment and easier to move in and out

  • Extra amenities based on multi-tenant access (Akamai Image Manager, Avalara Tax, etc)

  • Requires less expertise than traditional software to manage or make changes to the site

Cons:

  • Less flexibility in certain areas (hosting, security) than traditional software

  • Requires a little more expertise than simple SaaS due to the flexibility and powerful features

  • Sophisticated requirements may require customization or third party tools

A Condo Downtown PLUS a Weekend Home Is Headless Commerce

homes-and-headless-commerce

A new trend in ecommerce is going “headless” which is the decoupling of the front-experience managed by a content management system (CMS) from the back-end operations managed by an ecommerce platform. This enables a business to focus on building a differentiated, immersive user experience with the best content tools while leveraging the most powerful, secure, and scalable ecommerce infrastructure.

I’ll be honest, at first, I struggled to think of what housing arrangement best suited headless commerce. Then it dawned on me: these two systems are really providing you two separate experiences that benefit two aspects of your life. Just like a CMS, your weekend home is designed for the experience of relaxing next to a lake or the ocean. It’s designed to be immersive and differentiated from the hustle and bustle of your working weekdays. But, your downtown condo allows you to have easy, practical access to your office, meetings, business lunches, happy hours, and all of the obligatory productive tasks your weekdays demand, with minimal commute time and maximum efficiency.

Who is headless for? For content-forward brands or those that have already invested heavily in a CMS platform, it makes sense to go headless, so they can leverage a best-in-class platform for the commerce portions of the operation.

In other words, if you already have that nice place in the Hamptons tailored to your tastes, but just got a job in the city. It makes sense to find a condo near the office and all your favorite big city haunts.

It does mean you’ll have to pay for and maintain two environments, including ensuring that the necessary integrations are synced back and forth between the two. It’s like the added hassle of duplicating the essentials, like having two sets of pots and pans for your two homes. This adds complexity and increases the risk of needing repairs and replacements. It also increases the need for specialists to work on each environment that are likely not the same resources for both.

Pros:

  • Purpose-built tools to optimize each aspect of your online business (experience + operations)

  • Leverages existing investments in CMS platforms

  • Creates a great customer journey and story (Want to join me at my house in the Hamptons this weekend?)

Cons:

  • More expensive to own two platforms (unless one of them is WordPress)

  • Requires double the expertise to operate and maintain both

  • Synchronization between locations adds complexity, risk and potential costs

Home Depot DIY Is Microservices

diy-microservices

Another ecommerce buzzword these days is microservices. This is an approach to developing software platforms that deconstructs what would have traditionally been a single, monolithic platform into the component parts as miniature apps or “services” that are loosely coupled. This approach is highly desirable for very large, sophisticated merchants or software companies like Netflix, Amazon, and eBay whose requirements for complexity and scale have far outpaced the capabilities of any off-the-shelf software.

Despite the hype, microservices are really only applicable to a very small subset of the market today. First, the primary benefits are flexibility to meet extreme use cases and massive scalability with the right devops architecture and hosting. Since only large, complex companies need those benefits, it tends to be very expensive.

The vendors who offer microservices in ecommerce understand that they are providing powerful tools to big companies that have the budget and expertise to build out a microservices model.

All of the flaws of custom and traditional software return here, as the microservices model is essentially taking a hybrid of the two: it’s pre-packing component parts to be highly customized by developers. On the plus side, the developers are getting really high-quality components and can build a truly high-performance platform with the right expertise and time.

I view microservices like paying a bunch of money for unfettered access to everything at Home Depot. You have all of the tools and raw materials to build any house you want. Want to build a fifteen-story building with shoots and ladders? What about secret rooms and a lobby, with two commercial kitchens and fountain in the master bedroom? You can have everything you want.

Who does that?

Only those with unique requirements and a very large budget. You’ll probably need quite a few experts to help support the project as well. Maintenance is also going to require continued support from expensive experts, but hey, you’re Daddy Warbucks so knock yourself out and customize that west wing into a dance hall with disco balls and a DJ booth.

Pros:

  • Extreme flexibility and scalability

  • Better than starting from scratch

  • Might get you featured on Lifestyles of the Rich and Famous

Cons:

  • Wildly Expensive

  • Requires extensive expertise to build and maintain

  • Overkill for 99% of the population

What does this mean for merchants evaluating ecommerce platforms?

To each their own. The key is to understand what is important to you and make sure you don’t fall for the myths associated with renting vs. owning, or software vs. SaaS (aka building, buying, or leasing).

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